EmailProducer prices rose 1.7% in August, up from a 0.3% gain in July. That was the largest gain since the PPI jumped 1.9% in June 2009. The Briefing.com consensus expected the PPI to increase 1.2%. The increase in producer prices was driven almost entirely by higher costs for food and energy. Food prices rose 0.9% in August after increasing 0.5% in July. That was the largest gain since increasing 1.0% in November 2011. Almost a third of the gain came from an increase in dairy prices.
The effects of the drought so far have not been factored into the PPI. We expect larger food price growth in the near future. Energy prices ended five consecutive months of declines and jumped 6.4% in August. That was the largest increase since rising 6.7% in August 2009. Most of the increase came from a 13.6% increase in gasoline prices. Excluding food and energy, core PPI increased 0.2% in August after increasing 0.4% in July. That was exactly what the consensus expected. Much of the gain in core prices was the result of a 0.5% increase in prices for pharmaceutical preparations. Light truck prices, which accounted for much of the gain in core PPI over the last couple of months, have not eased and increased 0.6%. We anticipate a pullback in these prices in the near future. Pipeline pressures remained moderate. Core intermediate prices fell 0.2%. That was the fourth consecutive monthly decline. Core crude prices rose 2.2%.
